More than 500 hospital consultants are suing the State for back pay and an additional 1,800 may have to be compensated, landing the Health Service Executive with a potential bill for €700m.

The figure puts the cost of reimbursing doctors' wage increases that were withheld during the public pay freeze at an average of €300,000 for every consultant, including legal fees and interest due.

The potential windfall for hospital doctors stems from a contract they negotiated with the Government in 2008.

The contract allowed for two pay increases to bring their salaries to between €170,000 and €240,000. One increase was paid; the second, due in June 2009, was not because of pay cuts across the public sector triggered by the economic collapse.

Two consultants, Thomas Hogan, a retired anaesthetist, and John McDermott, an endocrinologist, took cases to the Employment Appeals Tribunal, claiming the pay increases due under the 2008 contract should have been paid. The Employment Appeals Tribunal agreed. In a ruling last December, it found that Hogan should be paid €100,000 and McDermott was due €14,000.

The Health Service Executive is now appealing that ruling. But on the foot of it, more than 500 hospital consultants started legal proceedings this year to secure the pay rises that were withheld during the bust. In some cases, they are also seeking compensation. In total, around 2,300 hospital consultants will be entitled to be compensated if the legal cases are successful.

The Government is considering a deal with consultants, to avoid the lengthy and costly litigation that could end up costing as much as €700m, once legal fees and other costs are included.

Brendan Howlin, the former minister for public expenditure and reform, already suggested a negotiated deal before he left office earlier this year.

Speaking last January, he said whatever liabilities accrue to the State will be met through negotiation.

No negotiations are underway as yet, however.

The HSE has appealed the Employment Appeals Tribunal ruling but in the High Court last month, a barrister representing 37 consultants asked for a hearing on two "lead cases" to press ahead.

Hospital consultants negotiated the pay rises in 2008. They agreed to change their work practices in return for higher salaries of between €170,000 and up to €240,000.

Most consultants signed up for the new contracts, which meant reducing their private practices and working extra hours and at weekends in public hospitals.

The corresponding salary increases were to be phased in over two payments, but while the first was paid, the second was not.

The economic collapse hit, the health minister refused to pay the second increase, and following the introduction of financial emergency legislation, consultants' pay was further reduced by 15pc.

Consultants have been lobbying the Government to have the cuts imposed on their contracts under financial emergency legislation to be reversed.

The shortage of hospital consultants in Ireland has been linked to their pay. Ireland ranks below the OECD average for doctors per head of population.